Wednesday, April 10, 2013

Mandating Corporate Sustainability Data

Corporate sustainability data is vital information for investors to make informed decisions and as such disclosure should be mandated by law. This is the view expressed in a white paper by Harvard University’s Initiative for Responsible Investment titled On Materiality and Sustainability: The Value of Disclosure in the Capital Markets.

The paper points out that mandated sustainability data would have a number of positive corollaries including diminished financial risks and improved investment opportunities. It can also reduce distrust in capital markets, cut excess speculation and short-termism, and help prevent financial crises.

Among those that do share sustainability data there are widely differing interpretations of what needs to be disclosed. Standardization would make this data easier to interpret and compare.

As of 2010 there was already $3.07 trillion of assets under responsible investment management in the US. However, poor corporate environmental and social governance disclosure is a serious problem that is hindering further investment.  According to research from EIRIS released in October, 2012, almost four fifths (78 percent) of surveyed investors indicated that poor ESG governance is a hurdle when investing in emerging markets.

© 2013, Richard Matthews. All rights reserved.

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